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In re Washington Mutual, Inc.

United States District Court, D. Delaware

February 2, 2015

IN RE: WASHINGTON MUTUAL, INC., et al., Chapter 11, Debtors.
v.
WASHINGTON MUTUAL, INC., et al., Appellees. BENJAMIN BUSH, Appellant, Bankruptcy No. 08-12229-MFW Adv. Pro. No. 10-50911-MFW

MEMORANDUM

GREGORY M. SLEET, District Judge.

I. INTRODUCTION

Appellant Benjamin Bush appeals from a January 3, 2012, Order and Opinion (D.I. 1-2, 1-3) of the United States Bankruptcy Court for the District of Delaware. Presently before the court is WMI Liquidating Trust's[1] Motion to Dismiss that appeal (the "Motion") (D.I. 10). For the reasons that follow, the court will grant Debtors' Motion and dismiss this case.

II. BACKGROUND

Prior to September 25, 2008, Washington Mutual, Inc. was a savings and loan holding company that owned Washington Mutual Bank. (D.I. 10, at 5). On September 25, 2008, the Office of Thrift Supervision closed Washington Mutual Bank and appointed the FDIC as receiver. The FDIC took immediate control of the bank, and that same day, executed an agreement to sell substantially all of the bank's assets to JPMorgan Chase Bank. On September 26, 2008, Debtors filed for chapter 11 bankruptcy relief in the United States Bankruptcy Court for the District of Delaware. (Bankr. Case No. 08-12229-MFW, D.I. 1). On February 23, 2012, the Bankruptcy Court entered an order confirming Debtors' Seventh Amended Joint Plan. ( Id., D.I. 9759).

This appeal stems from a lawsuit filed by Anchor Savings Bank in 1995 against the United States in the U.S. Court of Federal Claims (the "Anchor Litigation"). See Anchor Sav. Bank, FSB v. United States, 81 Fed.Cl. 1 (2008), aff'd in part, remanded in part, 597 F.3d 1356 (Fed. Cir. 2010). This cause of action then transferred to Dime Bancorp, another savings and loan holding company, through a merger of the two banks. In December 2000, Dime Bancorp issued Litigation Tracking Warrants (the "Dime Warrants") to each shareholder of Dime Bancorp. These publicly traded Dime Warrants entitled the holders (the "LTW Holders") to an amount of Dime Bancorp common stock worth 85% of any proceeds Dime Bancorp recovered from the Anchor Litigation. In 2002, Washington Mutual, Inc. acquired Dime Bancorp. Washington Mutual continued to prosecute the Anchor Litigation and agreed to honor the Dime Warrants with its own stock.

On April 12, 2012, certain institutional LTW Holders (the "Lead Plaintiffs") commenced an adversary proceeding against Debtors seeking declaratory judgment that the Dime Warrants represented a debt, and thus a claim to assets of the Debtors' bankruptcy estate, rather than an equity interest. (Bankr. Adv. No. 10-50911, D.I. 1). On September 6, 2011, the Bankruptcy Court entered an order that certified all LTW Holders as a class under Fed.R.Civ.P. 23 and appointed class counsel. ( Id., D.I. 275, Ex. 1, at 2). After a trial, on January 3, 2012, the Bankruptcy Court entered an Opinion (the "Dime Warrants Opinion") and Order (the "January 3 Order") granting judgment in favor of Debtors, determining that the Dime Warrants represented an equity interest. (D.I. 1-3, at 23).

Appellant purports to hold 1.5 million Dime Warrants. On January 26, 2012, Appellant filed a notice of appeal from the January 3 Order, which he later amended on March 3, 2012. (D.I. 1). Because the Dime Warrants Opinion did not resolve all outstanding questions surrounding the Dime Warrants issue, the Lead Plaintiffs and Debtors proposed a stipulated settlement agreement that sought to finalize the treatment of the Dime Warrants (the "LTW Settlement"). Appellant filed several objections to the proposed class-wide LTW Settlement. On February 13, 2012, the Bankruptcy Court overruled Appellant's and other individuals' objections and entered an order (the "LTW Settlement Order") approving the LTW Settlement. (Banla. Adv. No. 10-50911, D.I. 344). Appellant did not appeal from the LTW Settlement Order. On November 16, 2012, Appellee filed the present Motion to Dismiss. (D.I. 10).

III. LEGAL STANDARD

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 158(a)(1). When reviewing a case on appeal, the court reviews the bankruptcy court's legal determinations de nova, its factual findings for clear error, and its exercise of discretion for abuse thereof. In re United Healthcare Systems, Inc., 396 F.3d 247, 249 (3d Cir. 2005).

IV. DISCUSSION[2]

Appellant raises three issues on appeal: (I) whether the Bankruptcy Court erred by entering judgment in favor of Appellee in the Dime Warrants Opinion; (II) whether the Bankruptcy Court erred by overruling his objections to the LTW Settlement Agreement; and (III) whether the Bankruptcy Court erred by overruling his objection that class counsel had a disabling conflict of interest. (D.I. 4, at 2). Appellee's Motion to Dismiss argues that Appellant's appeal from the Dime Warrants Opinion is moot because it was superseded by the LTW Settlement Agreement, or alternatively, is equitably moot because the Debtors' confirmed plan has been substantially consummated. (D.I. 10, at 4). Appellee also maintains that issues II and III on appeal are not properly before this court because they were not decided in the January 3 Order. (Id.). In response, Appellant asserts that the Bankruptcy Court lacked subject matter jurisdiction over the LTW Claims dispute. (D.I. 11, at 14).

1. Lack of Subject Matter Jurisdiction

Appellant contends that the right to recover the proceeds of the Anchor Litigation was transferred from the FDIC to JPMorgan prior to Debtors' bankruptcy filing. (D.I. 11, at 6). He argues that this asset never became property of the Debtors' estate, and therefore, the Dime Warrants issue was not subject to the Bankruptcy Court'sjurisdiction. (Id.). The court must reject this argument. As an initial matter, the fact that Debtors claimed an interest in the Anchor Litigation was sufficient to confer jurisdiction in the Bankruptcy Court. See 11 U.S.C. § 157(b)(2)(O); In re Cont'l Airlines, 138 B.R. 442, 445 (D. Del. 1992) ("The determination of the property of the estate is one of the core proceedings arising under title 11."). Furthermore, this argument ignores the Bankruptcy Court's conclusion that the Dime Warrants did not provide the LTW holders with any interest in the Anchor Litigation itself, but rather an interest in Debtors' common stock that merely tracked the value of the Anchor Litigation proceeds. (D.I. 1-3, ...


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